The Good Steward Law and Wealth Podcast Generational Wealth: How to Actually Pass It On

In this episode, we break down the real strategies behind building and transferring generational wealth — and why the "Rockefeller method" you see online is often missing the most important parts.

What we cover:

• Why avoiding probate matters — It's time-consuming (6 months minimum in Arkansas, often longer), expensive (1–6% statutory fees), public record, and can lead to unintended outcomes for your family
• Revocable trusts — How they work, why they're the foundation of a good estate plan, and the critical second step most people skip: funding the trust
• Dynasty (generational) trusts — How assets can pass to your children in a protected sub-trust, shielding them from divorce, creditors, and bankruptcy — while they still maintain full control as their own trustee
• How the Rockefellers actually did it — Setting up structures designed to pass wealth down through generations, not just one-time transfers
• Tax planning — Why your attorney and financial advisor need to be working together, and how capital gains planning (including step-up in basis, tax loss harvesting, and direct indexing) can save your heirs significantly

Key takeaway: Leaving assets to your kids outright and leaving them in a protected generational trust are very different things. The right structure protects wealth from outside forces while giving the next generation full flexibility and control.

Questions or want to discuss your specific situation? Visit ljenningslaw.com to book a consultation.

Welcome back to the Good

Steward Law and Wealth Podcast.

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Uh, those of you watching on video,

you may see we're in a new studio,

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um, that we have here at the office.

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So, uh, excited to have this good

background But t-in today's episode,

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what I wanted to talk about is

passing wealth on generationally

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and how we think about it.

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Um, I've seen a lot of things

on the internet lately about

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how the Rockefellers did it.

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Uh, and typically when you see

that, it is a life insurance agent

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trying to sell you life insurance.

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Um, they'll tell you you need to

purchase a life insurance policy

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every time one of your kids is

born and use it as a personal bank.

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Um, so that's what they're talking about.

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But what they skip over is how the

Rockefellers actually did it, you know,

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how they actually passed on their wealth.

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Now, I don't know the Rockefellers'

specific estate plan, but I know enough

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being an attorney that these are the

general structures that they set up.

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And honestly, it is the same structure

that I set up for most of my clients, uh,

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I have set up for myself, for my parents.

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It's, it's really what I recommend.

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Um, but to start, we kind of revisit

what we've talked about a lot on, on

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these podcasts is my first goal with

client meetings is when I meet with

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someone, we wanna set them up in a way

to avoid probate so that everything

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you have passes on to the next

generation outside of the court system.

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Uh, just briefly, you can go back

and listen to some of my other

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podcasts on probate specifically,

but why you wanna avoid it is, I tell

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people it's really the, the big few

things is one, it's time-consuming.

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Uh, probate takes a minimum of six

months in Arkansas, but usually lasts

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a little bit longer than that, a year.

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We have one that's, uh, went on two years.

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I got appointed on a case that's been

going on probably seven years, um, and

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I came in at the-- in the middle of it.

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Um, so it can be a really long process.

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It can also be expensive.

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Um, attorneys and representatives can

charge a statutory fee, which is anywhere

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from one to six percent of the estate.

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Um, the other thing is it's public, uh, so

everything you have is on public record.

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If you wanna go look at your local

courthouse, you can Google it.

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Uh, Arkansas is called courtconnect.com.

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You can see every open

case, even closed cases.

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So you're gonna know what someone

owned and where it went, um,

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which most people don't want.

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And then the last thing is

unintended consequences.

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A lot of times things don't go how

you would want, 'cause people think,

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"Oh, I don't have an estate plan."

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Actually, you do.

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The state has one for you, and it

may not match what your intent is.

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Um, example I give just real quick

on what, what I mean by that is, you

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know, say we've had a husband and

wife that own a property together.

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It was a rental property that they

were living off of, their income,

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they would get the rent from it.

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Uh, turns out it was only in the wife's

name, and then when the wife passed away,

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the, the husband thought, "Oh, well,

I'm still gonna get this rental income.

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It's still mine."

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But actually what the law says is he gets

a third, and then the kids get two thirds.

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So that clearly wasn't their intent.

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That was his retirement plan.

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Uh, but luckily in this case, you

know, the family got along, they

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said, "Hey dad, this is yours.

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We're signing it over to you."

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But you could see how that

wouldn't always be the case.

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So long way to say, I like to set

all my clients up to avoid probate.

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Um, so that's step one.

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And then step two is how do

we actually avoid probate?

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And I can tell you of a few ways.

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There's all kinds of ways, but what we're

gonna talk about right now is using a

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trust to avoid probate because this is

really how you build and pass on wealth

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generationally in a protected manner.

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So there is all kinds of trusts,

but the one we're gonna talk

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about right now is what I call a

revocable trust that turns into a

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dynasty trust, which we will get to.

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But revocable trust just means you set

it up today, say husband and wife set

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up a trust, they can change it whenever

they want, you know, they're trustees

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of it, they're in charge of it, they

do whatever they want in their life and

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nothing in their day-to-day life will

really change while they're living.

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But the benefit of that trust is if they

are incapacitated, whoever they name

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as successor trustee, let's just say

their son, can step in and manage that

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trust for them while they're unable.

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So they're in the nursing home,

son steps in, pays all the

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bills, keeps their life rolling.

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So that's the benefit there.

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But the second benefit is

everything in that trust avoids

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probate when they pass away.

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So basically anything owned by the trust

just passes directly to, let's just

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say in this example they have a son

and daughter, passes directly to the

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son and daughter after they're gone.

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No court involvement.

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Quick, easy and in a protected way.

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So how does that actually work?

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When you set up the trust,

just like a will, you know, a

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will is a one and done process.

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And again, go back to my other podcast,

but a will does not avoid probate.

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And the reason being is when you set up a

will, you sign the document, you're done.

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There's no other step.

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It tells the court where

you want your stuff to go.

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So better than nothing

but not the best plan.

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Now, a revocable trust

has two steps to it.

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So you set up the trust, you sign the

document, but then you have step two

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of putting your assets in that trust.

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So how we do that is example,

uh, investment account.

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You have a brokerage account with

Charles Schwab, then you name

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the trust as the beneficiary.

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Or if you're opening a new account,

you can just open it in the

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name of the trust, meaning you

create the account in your trust.

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Um, the other thing, say you have

life insurance, um, you make the trust

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the beneficiary on those accounts.

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Say you have IRAs or 401Ks, you

make the trust the beneficiary.

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Real estate like your house, you deed

that house and that property to the trust.

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So when you look online, it'll show

that instead of the house being in your

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name, it is in your trust name, but

you are trustee of it and you are the

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beneficiary so it's still your house.

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That's how we get everything in the trust.

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And like I said, anything in the trust

passes outside of probate to whoever

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you're leaving your stuff to So that is

generally how things work with a trust.

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Now why it's beneficial and why we

talk about it in our practice and why

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I talk about it in, with, uh, wealth

managers and why it's important to do

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this structure, because I think this

structure that I'm about to talk about

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is the most beneficial and best way to

leave assets for the next generation, and

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not enough people are talking about it.

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Now, we always talk about it in

my practice and with the partners

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I work with on wealth management.

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We always talk about this, and

we really set our clients up

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with in this way to do this.

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So what it's called, like I, I mentioned

earlier, is a dynasty trust, and really

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it is just a fancy way to say, "I'm

leaving everything to my kids in a trust

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that will be passed down generationally."

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So I usually draw a flow chart for my

clients and show them how this works.

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But let's say we have your

revocable trust up here.

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O-one spouse passes away, everything

can go to the surviving spouse,

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nothing really changes there.

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And then, but then when you both pass

away, we move down to that third level,

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and we're leaving things to the kids.

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And you always have options

on how you leave things.

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One way is to just say, "All right, it

goes outright to them free and clear.

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They can do what they want to with it."

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It's like they're getting a check.

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The other way is to leave

it to them in a trust.

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That's what I'm talking

about with a dynasty trust.

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So when you pass away, your trust

becomes irrevocable, and it says, "I

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want to create sub-trusts for my kids."

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So basically, when you pass away, they

meet with me, we create the sub-trust,

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we divide the assets and put it in there.

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So in the example we're using, we

take everything divided fifty/fifty.

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Each child, son, daughter, gets their own

trust that they are their own trustees

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of, assuming that's who you want.

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If they're responsible and okay

with managing money, I usually say,

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"Yes, make them their own trustee."

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So what that means is they are

the trustee, so they decide how

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it's invested, how they, uh,

make distributions to themselves,

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what they use it for, all that.

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They have free control and

flexibility over their assets.

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But it is protected from creditors,

divorce, bankruptcy, all that.

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So let's say a daughter gets a divorce.

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Whatever her parents left her in this

trust is protected for generations.

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I mean, and it doesn't go to

ex-husband, it stays with daughter.

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The other benefit of that is

it goes down generationally.

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So let's say something happened

to the son and he passed away.

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That trust is already set up to go

down to his kids and grandkids and

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great-grandkids, just down that line.

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That's why they say that's how the

Rockefellers did it, 'cause they set

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things up to pass generationally.

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Um, that's why I think it's really,

really valuable, because why would

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you not want to inherit something in

a protected manner, protected from

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all outside forces that you still have

the flexibility and the control of?

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That is the most

beneficial way to do that.

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Now, there is some drafting nuances

to this when you set up your trust.

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So it needs to be done by an expert

attorney that knows what they're doing.

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And I'll kind of briefly talk

about how we get the protections.

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Um, so generally, when you read some

of my trust, uh, there's a few more

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nuances to this, but a lot of times

you'll see in there they can make

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distributions to themselves for health,

education, maintenance, and support.

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So your kids are trustees and

they can make distributions to

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themselves for those reasons.

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So health and education is explanatory,

you know, school, doctors, whatever.

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But then those last two words, maintenance

and support, is pretty broad, and if

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they are their own trustee, they are

determining essentially what they

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need for maintenance and support.

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So they can access what you leave

them and distri- distribute it to

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themselves for whatever reason.

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But how they get asset protection

generally is, let's say they

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are sued, they can step back and

say, "Hey, this isn't my stuff.

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This is in the trust, and I can't

make distributions for just anything."

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So that's how they get the

asset protection, and that's

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where the value comes in.

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And another thing to think about is a lot

of people's wealth is, uh, built in IRAs

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and 401s, and they have specific laws

on how you can leave those to people.

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Um, and I did a whole podcast

on this earlier on that.

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So go back and listen to it.

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I won't get in the whole weeds on this.

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But just know that your dynasty, your

generational trust needs to be drafted

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appropriately to accept those assets.

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That's what we do.

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I make sure the trust are drafted

appro- appropriately, especially if I

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know you have these types of assets.

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And it's important that your attorney

and your financial advisor are either

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the same person or working together,

'cause there is so much value left

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on the table if they're not, 'cause

someone needs to play that quarterback.

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Someone needs to know where your

assets are, how they sit, how

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they're titled, and how to structure

them within your estate plan.

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And one other thing I wanna

mention too is tax planning.

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It is a huge portion of this.

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With the clients we work with, we ask

for their tax return a lot of times.

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Think about it.

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Who, what attorney or financial

advisor has asked for your tax return?

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I bet it's very few.

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But they should be, because you need

to analyze that and know where the

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planning opportunities are within that.

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And I'll give this example where we- we've

seen a lot of value So say you have a low

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basis, uh, property or a stock you own.

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Let's say you own a r-real estate

property that's been a rental property

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for years, or you have Walmart stock,

that you've owned this for thirty years.

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You bought it really low.

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It's worth a lot of money now.

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Now, what happens with that is if

you were to sell either of those,

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you're gonna owe capital gains tax on

it, and that can be a pretty big tax

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based on the difference of what you

bought it for and what it's worth now.

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So one of the most valuable types of

planning we do with this generational

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structure is capital gains tax planning.

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Uh, now, one easy way to do

this is I always say, let's say

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you have this Walmart stock.

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You don't plan on ever selling it.

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You don't really need it.

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You're not living off of it.

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You're living off your IRAs

and your retirement accounts.

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But this Walmart stock,

you don't really need.

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Well, then I say, "Let's hold it, and

let's put it in this trust and leave

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that to the kids," because they will

get a step-up in basis and inherit

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that Walmart stock completely tax-free.

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So you wanna eliminate capital

gains tax, that's one way to do it.

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Now, there's other ways to do it that

if you are going to sell that property

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or sell that stock because, you know,

you need the money or it's just time you

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feel like you need to diversify a little

bit, you don't want so much wealth built,

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built in Walmart stock or whatever it is,

there's some other strategies we can do

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that you'll hear people talk about, and

I won't get into the details of this, but

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tax loss harvesting and direct indexing,

some different things you can do to build

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up this bank of tax losses, so when you

sell your sh- appreciated stock in the

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future, it will essentially eliminate

or minimize that capital gains tax.

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So those are two strategies

that we work with.

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But I just wanted to show how

things that when you plan fully

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generationally and plan with the

next generation in mind, starting

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with the parents, with a professional

that's acting as that quarterback

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and sees the whole big picture,

this is the benefit that can happen.

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I mean, you're gonna leave things

generationally that's protected,

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that minimizes taxes, that goes

to who you want it to go to.

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So this has been The Good

Steward Law & Wealth podcast.

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I appreciate everyone listening again.

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Um, and again, if you have any questions

or want some more detail, just, uh,

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go to our website, ljenningslaw.com,

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um, or it's all over the, the podcast,

our information, and try to book a

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meeting with me, and we can talk through,

uh, some of your specific details.

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Thank you.